Pubdate: Thu, 12 Nov 2015
Source: Tucson Weekly (AZ)
Copyright: 2015 Tucson Weekly
Contact:  http://www.tucsonweekly.com/
Details: http://www.mapinc.org/media/462
Author: Tanner Clinch

NOT IN THE BANK

MMJ businesses to conduct business the normal way, except when it 
comes to keeping their cash in a bank

Picture yourself as a humble small-business owner. You arrive at work 
one fine, crisp Tucson morning to a surprising letter from your bank. 
It says you have two weeks to get any and all the assets out of your 
account before they freeze it indefinitely.

The rent on your office is due next week, and Friday is payday for 
your employees, and Tucson Electrical Power is wondering when they 
are going to get their check for last month's energy usage. The bank 
offers no explanation of why your account was closed.

This is the daily reality for small business owners who conduct 
services in the medical marijuana industry throughout Arizona.

For Aari Ruben, owner and operator of Desert Bloom Re-leaf Center, 
this exact scenario has happened to him six or seven times since 
opening the doors of his business a little more than two years ago. 
The most recent note he happened to receive from Chase Bank the 
morning he spoke with Tucson Weekly.

"Basically they just see the large amount of cash going in on a 
regular basis and the names of the vendors we're paying money to and 
try to get rid of it," Ruben says. "They don't give any reason for 
it, and it's not something we can ask them to reconsider."

All banks are FDIC insured, which means they have to abide by federal 
law in order to keep that certification. Although these businesses 
are perfectly legal under the Arizona Medical Marijuana Act, they are 
still illegal federally.

"They don't want to risk their line of revenue," Ruben says. "This 
seems like a big business, but relative to other more developed 
industries, it's really small."

Businesses such as Ruben's are using their bank accounts in the same 
way all traditional businesses do-to write checks to pay for rent, 
utilities, payroll and all of the sales taxes that they incur. The 
only difference is that these businesses serve medical marijuana patients.

This happens so frequently to Ruben's business that they already have 
a contingency plan to deal with their account being closed. By 
staying ahead of the game they have another bankroll open before the 
old one is closed and simply transfer the money to the new account.

"It's an interruption that every other type of business doesn't have 
to deal with," Ruben says. He says it's a hassle having to deal with 
this on such a regular basis. Changing accounts requires him to 
change their payroll, deposit slips and utilities checks.

Similar scenarios happen to patient referral centers as well, even 
though they are not selling any marijuana product, their accounts get 
shut down.

Dr. Reeferalz, an Arizona based medical marijuana referral center had 
this happen to them despite banking with Wells Fargo for more than 
two years. One day their bank account was shut down with no 
professional letter, and none of the teller's who knew the business 
owner and had helped him set up the account could answer any of his questions.

Both Chase Bank and Wells Fargo, places where Ruben has had bank 
accounts related to his business shut down, declined to comment.

Tumbleweed Health Center, the longest running medical marijuana 
referrals business in Tucson, used different methods to handle their 
money, but were closed in similar fashion. Kim Williams, Tumbleweed 
Health Center co-founder says they used both Intuit and Square, 
mobile banking apps, to serve their patients. The two companies 
eventually closed their accounts.

"Both Intuit and Square says it was specifically because of medical 
marijuana," Williams says, adding that both companies closed their 
accounts with next to no prior notice.

The strange part is that despite these businesses being illegal 
federally, it does not stop them from paying federal income tax on 
all the accounts they have open in their name. Internal Revenue Code 
section 280E allows for the taxation of illegal income in the same 
way as legal, but refrains from letting "illegal" business take tax 
deductions that most businesses would expect.

Administration, labor, utilities, occupancy, everything that's 
associated with bringing a product to market is not deductible for 
Ruben's business.

"Even though we're operating a business that isn't legal under 
federal law, we're still taxed heavily and denied our basic 
deductions," Ruben says. "The government doesn't care whether your 
source of income is legal or illegal, they still expect to be paid 
their taxes."

For these businesses, they aren't trying to do anything shady like 
selling marijuana to non-medical patients or make drug deals with 
drug cartels. They are simply trying to serve the people that they 
view as patients in need of medicine.

"We want to be transparent on that," Ruben says. "We don't want to 
hide any money or play any shell games. We're just trying to operate 
our retail service and serve our patient population."

Until it becomes federally legal, it seems these businesses are SOL 
in terms of banking. Attempting to open up an account and disguising 
the fact that your business is a provider of either medical marijuana 
or medical marijuana referrals could be considered money laundering.

"It's a nightmare. It's challenging and it creates a lot on anxiety 
being in a business that people aren't readily willing to accept 
yet," Williams says. "We're not going let anyone stop us, we're going 
to keep plugging."
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MAP posted-by: Jay Bergstrom